Study links wage increase to job losses on farms

In 2012, farmworkers in the Western Cape went on strike demanding a R150 a day. Photo: Surplus Peoples Project.

The 2013 increase in the minimum wage for farm workers did cause a drop in employment, new research by the Southern Africa Labour and Development Research Unit at the University of Cape Town suggests.
However, the researchers were unable to determine exactly how many jobs the wage increase cost. The study also found that the average wage for rural farm workers increased, meaning that the legislation was being followed.

On 1 March 2013, legislation came into effect requiring a higher daily minimum wage of R105 per day for any agricultural worker who worked nine hours or more; at the time, this was a 52% increase (from R69 a day) over the previous minimum wage. The legislation also tied future increases in the minimum wage to inflation.

Previous research across various sectors in South Africa had found that minimum wage increases had either insignificant or negative effects on employment rates. A similar study done on the previous agricultural minimum wage increase in 2003, found that it slightly decreased the employment rate.

The researchers studied data in the Quarterly Labour Force surveys by Statistics SA across the country. Initially, said Ihsaan Bassier presenting the research, they were able to establish that the minimum wage increase occurred at the same time as a decrease in rural agricultural employment. After the wage increase in March 2013, the rural agricultural employment rate fell by 14% in the remaining quarters of the year. However, they needed to determine if that job loss was caused by the minimum wage increase, or by some other factor, such as drought, plant disease, or late rains.

In order to solve that problem, researchers compared the employment trends in areas where the original agricultural wages had already been close to R105 a day, with areas where the wage had been much lower. The higher income areas would have been much less affected by the wage increase, than lower wage areas. Additionally, they checked the overall agricultural output, to see if bad crop conditions were the reason for lower employment.

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Overall, the researchers say the data shows that minimum wage increase did cause substantial job loss among rural farm workers. However, they do caution their results, saying that possible measurement errors and small sample sizes may complicate the findings.